There is no single LLC tax rate that applies by state. What your LLC actually owes is a stack: federal self-employment tax of 15.3% on net profit, your personal state income tax rate applied to your share of pass-through profits, and whatever entity-level taxes and fixed fees the state charges the LLC directly. LLC tax rates by state vary from zero personal income tax in nine states to top marginal rates above 10% in California and New York, and the states with no income tax often make up for it with franchise taxes, gross receipts taxes, or business profits taxes that hit the LLC whether or not it earned money.
Why the State Layer Starts With Federal Classification
Most states follow the federal government’s treatment. A single-member LLC is a disregarded entity by default, with profits reported on the owner’s Schedule C. A multi-member LLC defaults to partnership treatment, filing Form 1065 and issuing each member a Schedule K-1 for their share of income.1Internal Revenue Service. Partner’s Instructions for Schedule K-1 (Form 1065) Because the LLC itself typically doesn’t owe federal income tax, your state income tax rate on LLC profits is simply your personal state rate applied to your share. A 5% state rate on $100,000 of profit is about $5,000 before deductions and credits. That is the baseline; the entity-level taxes and fees come on top.
States With No Personal Income Tax on LLC Profits
Nine states impose no broad-based personal income tax: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire. If you live and operate your LLC entirely within one of these states, your share of profits is not subject to state income tax on your personal return.
“No income tax” is not the same as “no state tax on your LLC,” though. Several of these states charge entity-level taxes that can be larger than a modest income tax bill would be:
- Texas imposes a Margin Tax with rates of 0.375% for retail and wholesale and 0.75% for other businesses, with a no-tax-due threshold of $2,650,000 in total revenue for the 2026 and 2027 report years.2Texas Comptroller of Public Accounts. Franchise Tax
- Washington charges a Business and Occupation tax on gross receipts, with service businesses paying 1.5% and other classifications paying different rates. There is no deduction for ordinary business expenses.
- Tennessee levies an excise tax of 6.5% on Tennessee taxable income plus a franchise tax of 0.25% on net worth, with a $100 minimum that applies even to inactive entities. The state repealed the property measure of the franchise tax for tax years ending on or after January 1, 2024, so the franchise base is now net worth alone.3Tennessee Department of Revenue. Franchise and Excise Tax4Tennessee Department of Revenue. Important Notice – Franchise Tax Property Measure Repeal
- New Hampshire imposes a Business Profits Tax at 7.5% on net business income and a Business Enterprise Tax at 0.55% on compensation, interest, and dividends paid. The BET can be credited against BPT liability.5NH Department of Revenue Administration. Business Taxes
Alaska, Florida, Nevada, South Dakota, and Wyoming remain the cleanest states from an LLC tax standpoint, with no personal income tax and no broad entity-level income or gross receipts tax on ordinary LLCs.
Personal Income Tax Rates Applied to LLC Profits
Among states that do impose a personal income tax, rates vary widely. Some use flat rates and others use graduated brackets. Top marginal rates in California, New Jersey, and New York exceed 10%. Arizona, North Dakota, and Indiana sit below 4%. Whatever your personal marginal rate is in your state is what applies to your share of LLC profit that flows through to your return.
Franchise Taxes and Gross Receipts Taxes at the Entity Level
Many states tax the LLC itself, separately from what its owners pay on profits. These are owed whether or not the LLC is profitable, which makes them particularly costly in a lean year.
Franchise Taxes
A franchise tax is a fee for existing as a business entity in the state. Delaware charges a flat $300 annual franchise tax on every LLC, regardless of income or activity.6Delaware Division of Corporations. LLC/LP/GP Franchise Tax Instructions Tennessee’s franchise tax of 0.25% of net worth sits alongside its 6.5% excise tax on income.7Tennessee Department of Revenue. Due Dates and Tax Rates
Gross Receipts Taxes
Gross receipts taxes apply to total revenue before any deductions. Ohio’s Commercial Activity Tax runs at 0.26% on taxable gross receipts, but for tax years 2025 and forward only businesses with more than $6 million in Ohio gross receipts are subject to it. That is a significant jump from the $3 million threshold that applied in 2024.8Ohio Department of Taxation. Commercial Activity Tax
Texas’s Margin Tax functions as a gross receipts tax with limited deductions: the base is total revenue minus the greater of cost of goods sold or compensation, among other allowed calculations. Washington’s B&O tax works the same way, taxing gross revenue with no deduction for ordinary expenses.
Annual Minimum Taxes and Fees
Fixed annual costs are the floor. They apply whether you earn $1 million or lose money. California is the most expensive state for LLC maintenance: every LLC doing business in California or organized there owes an $800 annual tax, regardless of income. The temporary first-year exemption that ran from 2021 through 2023 has expired, so LLCs formed in 2024 or later owe the $800 starting in year one.9State of California Franchise Tax Board. Limited Liability Company
California adds a tiered annual fee on top of the $800 for LLCs with California-source income above $250,000:10State of California Franchise Tax Board. Limited Liability Company Filing Information
- $250,000 to $499,999: $900
- $500,000 to $999,999: $2,500
- $1,000,000 to $4,999,999: $6,000
- $5,000,000 or more: $11,790
A California LLC earning $600,000 in profit owes $800 plus $2,500 in fees before its owners calculate any personal income tax.
New York imposes a tiered annual filing fee on LLCs based on New York-source gross income from the preceding tax year:11New York State Department of Taxation and Finance. Partnership, LLC, and LLP Annual Filing Fee
- Up to $100,000: $25
- $100,001 to $250,000: $50
- $250,001 to $500,000: $175
- $500,001 to $1,000,000: $500
- $1,000,001 to $5,000,000: $1,500
- $5,000,001 to $25,000,000: $3,000
- Over $25,000,000: $4,500
Most other states charge annual report or registration fees ranging from about $9 to a few hundred dollars per year. Modest individually, but an LLC registered in multiple states pays each one separately.
The Pass-Through Entity Tax Election
The 2017 federal tax law capped the state and local tax deduction at $10,000 on personal returns. For LLC owners in high-tax states, state income tax above $10,000 became non-deductible federally. Thirty-six states have adopted an elective pass-through entity tax as a workaround.
The LLC elects to pay the state tax at the entity level instead of the owners paying it personally. The IRS confirmed in Notice 2020-75 that these entity-level payments are deductible on the LLC’s federal return as a business expense, not subject to the $10,000 SALT cap.12Internal Revenue Service. IRS Notice 2020-75 Owners then receive a credit on their personal state returns so they aren’t double-taxed. New Mexico, for example, taxes electing pass-through entities at 5.9%, the higher of its top personal and corporate income tax rates.13NM Taxation and Revenue Department. Pass-Through Entity If your state offers this election and your state income tax exceeds $10,000, the PTET is almost always worth electing.
Multi-State LLCs: Where You Owe and How Much
Operating in more than one state raises two questions: which states can tax you, and how much of your income each state can claim.
A state can only tax your LLC if you have nexus there. The traditional test required physical presence like an office, warehouse, or employee. After the Supreme Court’s 2018 Wayfair decision, most states also assert economic nexus based on sales volume or transaction count, at least for sales tax purposes. Crossing a nexus threshold in a new state can trigger filing obligations, minimum taxes, and franchise fees in addition to income tax.
Once a state has jurisdiction, apportionment formulas divide your income. The traditional approach averaged three factors: property, payroll, and sales. Most states have moved to a single sales factor formula, allocating income based on where your customers are. If 30% of your sales go to customers in a single-sales-factor state, that state taxes 30% of your apportionable income.
Federal law provides one narrow shield. Under 15 U.S.C. Section 381 (Public Law 86-272), a state cannot impose a net income tax on your LLC if your only activity there is soliciting orders for tangible personal property, provided the orders are approved and fulfilled from outside the state.14Office of the Law Revision Counsel. 15 USC 381 – Imposition of Net Income Tax The protection covers only net income taxes, not franchise taxes, gross receipts taxes, or minimum fees. It applies only to sales of physical goods, not services or digital products. Activity beyond basic solicitation, such as on-site installation, post-sale technical support, or maintaining inventory in the state, can strip the protection.15Multistate Tax Commission. Statement of Information Concerning Practices of Multistate Tax Commission and Supporting States Under Public Law 86-272 An LLC protected under P.L. 86-272 from a state’s income tax may still owe that state’s franchise tax, annual fees, or gross receipts tax.
Self-Employment Tax and the S-Corp Election
Before state tax enters the picture, self-employment tax takes a large share of LLC profit. Every dollar of net profit from a default LLC is subject to a combined 15.3% self-employment tax covering Social Security (12.4%) and Medicare (2.9%).16Internal Revenue Service. Self-Employment Tax (Social Security and Medicare Taxes) The Social Security portion applies only up to $184,500 in earnings for 2026.17Social Security Administration. Contribution and Benefit Base The 2.9% Medicare tax has no cap. If self-employment earnings exceed $200,000 single or $250,000 married filing jointly, an Additional Medicare Tax of 0.9% applies to the excess. An owner clearing $150,000 in profit pays roughly $21,200 in self-employment tax alone.
An LLC can elect to be taxed as an S-corporation by filing Form 2553, generally within two months and 15 days of the beginning of the tax year the election is meant to take effect.18Internal Revenue Service. Filing Requirements for Filing Status Change For a calendar-year LLC wanting S-corp treatment in 2026, that deadline is March 15, 2026. Under the election, you pay yourself a reasonable salary subject to the full 15.3% in payroll taxes; the remaining profit passes through as ordinary income but is not subject to self-employment or payroll tax. On $200,000 of LLC earnings with a $90,000 salary, only the salary faces payroll taxes.
The IRS watches salary levels closely, and setting the number artificially low is the fastest way to trigger reclassification.19Internal Revenue Service. Wage Compensation for S Corporation Officers (FS-2008-25) The election also adds payroll processing costs and a separate Form 1120-S return, so it generally pays off only when profits are high enough that the tax savings outweigh the extra compliance work.
Quarterly Estimated Payment Deadlines
LLC owners aren’t withheld against, so you send quarterly estimates to the IRS and to your state. For the 2026 tax year, federal estimated payments are due April 15, June 15, and September 15, 2026, and January 15, 2027.20Internal Revenue Service. IRS Publication 509 Most states follow the same schedule; a few set their own dates.
Missing a deadline triggers an underpayment penalty. The IRS charges interest on underpayments at a rate that adjusts quarterly, and as of early 2026 that rate is 7%.21Internal Revenue Service. Interest Rates Remain the Same for the First Quarter of 2026 State penalties vary but generally track the federal structure. Because quarterly estimates cover both income tax and self-employment tax, underestimating even modestly across four quarters can produce a penalty bill larger than the shortfall feels like it should be.